Rates Spark: Demand For Safety To Stay

2025-04-10 04:30:00 ET

Summary

• Risk assets are benefiting from the delay in tariffs, but rate markets remain careful about outstanding risks.
• The US front end of the curve doesn't suggest a radical change in market perception yet.
• Increased volatility means safe assets such as 10Y bunds may see elevated demand for now.

By Padhraic Garvey, CFA , Michiel Tukker , Benjamin Schroeder

US Treasuries give the pause trade a mild thumbs up

Risk is back on since the tariff pause news, with material rallies on equity markets (the ones open) and some retightening in credit spreads (high yield 5yr CTX is tighter by a notable 60bp). This is understandable, as the general sense of anxiety has diminished. Market rates though are less excited, which is a reminder that there remains a material elevation of angst. This also makes sense, as the tariff barriers remain, albeit reduced in certain areas and only for 90 days....

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